After watching Aaron Beam's interview with Kirk O. Hanson and reading his responses to Edward Teach, I was angered by the excuses he gave for committing accounting fraud. While it is nice to see Mr. Beam finally being accountable for his actions, his words in these interviews resonated with me as him still trying to cover up what he did only this time with the excuse of rationalization and him trying to profit from his unethical behavior by lecturing to students.
What Happened
Starting at the source of the ethical dilemma gives a clear idea of what went wrong. According to Mr. Beam it began with some aggressive accounting techniques that lowered bad debt expense, something that was "pretty common knowledge and practice with people on Wall Street." He rationalized that he would do a better job collecting debt and even informed his auditors that he was doing it. Accounting techniques that Mr. Beam calls aggressive accounting techniques are accounting methods that normally have not yet broken any laws or principles, but do not necessarily provide a true and transparent view of the company.
In 1995, Beam claimed he was pressured by the HealthSouth CEO and co-founder, Richard Scrushy, as they were facing an earnings reporting deadline to make their numbers look better than they were to meet investor expectations. This practice is also commonly referred to as "cooking the books." In his interview Mr. Beam stated that Mr. Scrushy was not the type of guy to let you go home and sleep on it and sometimes carried a gun in his brief case, hinting that he was almost afraid for his life if he did not comply with Mr. Scrushy's request. Aaron Beam later resigned from HealthSouth and had several CFO successors who admitted to the $2.7 billion fraud l that occurred between 1996 and 2002. It wasn't until Weston Smith finally blew the whistle that Health South began to be investigated for fraud, resulting in Mr. Beam serving 3 months in prison, Mr. Smith serving 27 months, and several other CFOs serving jail time. One of the worst parts of the whole scandal was that MR. Scrushy, the bully directing the fraud, was acquitted on all counts.
Ethical Opinions
Throughout both interviews, Mr. Beam drew the picture that Richard Scrushy practically held a gun to his head pressuring him to falsify earnings. He justified his rationalization that he “wasn’t putting money in his pocket, just fudging company numbers to meet Wall Street expectations” was a valid excuse. Now he wants college students to realize that there are people like Scrushy that will push you to commit fraud and to be prepared.
First, at any time Mr. Beam could have walked away and alerted authorities. While I understand that having someone threaten your job security in a company you helped build can be detrimental, it ultimately was Beam’s choice. He compared Mr. Scrushy’s request to peer pressure. I faced a lot of peer pressure in high school, but was able to “Just say NO”. Second, he claims that he wasn’t putting money in his pocket. I don’t doubt for a second that he wasn’t rewarded with stock earnings that were inflated because of his fraudulent actions. Third, he is still making money on the scandal by getting paid to lecture to college students. While it is important for students to learn ethics, should he really be allowed to profit from what hurt so many investors? The most important conclusion to draw from this though is a company can be rebuilt, you can always make more money, but damage to integrity and reputation can last a lifetime. Do what Mr. Beam should have done and say no! There is no excuse including rationalizations for committing accounting fraud.
Works Cited
Josephson Institute. "Rationalizations in Accounting Fraud." Josephson on Business Ethics and Leadership. Joseph Institute Center for Business Ethics. 19 January. 2011 Web. 10 October. 2011
Teach, Edward. "I Should Have Said No." CFO Magazine (2009). Web. 10 October. 2011
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